Cost of Owning an SUV in India Keeps Going Up

By Santanu Choudhury

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Mahindra Quanto

In India, prices of locally-produced sports-utility vehicles, as well as imported luxury cars and high-end motorcycles, are set to rise after taxes on these vehicles were increased in Thursday’s budget.

“SUVs occupy greater road and parking space and ought to bear a higher tax,” Finance Minister P. Chidambaram said as he announced a three percentage point increase in excise tax on SUVs to 30%. SUV taxis are exempt from the increase.

Sales of SUVs in India have risen this fiscal year, bucking a general downtrend in the local automobile industry. Demand has been boosted by the introduction of new models such as Renault SA’s Duster and Mahindra & Mahindra’s Quanto, and also because most SUVs are powered by diesel, which costs less than gasoline.

In a separate move to tax the “affluent class,” Mr. Chidambaram said import tax on luxury cars and SUVs has been increased to 100% from 75%. Last year, import tax was raised from 60% to 75% on these vehicles, classified as costing more than $40,000 and with gasoline engines of 3.0-liters or diesel engines of 2.5-liters.

“(The) increase in tax for imported cars and excise tax on SUVs is very surprising. It will severely impact the auto industry and its growth,” said Michael Perschke, head of Audi India. He said the company has “no choice other than to pass on the increase to the customer.”